The Value of Health Insurance: Evidence from a Field Experiment in India

Given the significant health risks faced by households in developing countries, publicly provided health insurance may confer important benefits. Yet, demand for formal insurance is often found to be low. Since health insurance may be relatively unfamiliar to many households, understanding the factors that shape households’ demand for, and ability to utilize, insurance is important for research and policy. It is also important to understand the health and financial impacts of health insurance. We shed light on these questions using a two-stage randomized control trial in Karnataka, India. Many households are willing to pay for insurance. Households’ ability to successfully utilize the insurance is limited, however, especially when only a small fraction of the community has access to insurance. When a higher share of the community has access, households are more able to benefit, suggesting that harnessing community learning is important in designing the rollout of health insurance.

Cynthia Kinnan is an assistant professor of economics at Tufts University and a Research Associate of the NBER. She holds a Ph.D. in economics from MIT. Her research lies in the areas of economic development and social networks, with emphasis on understanding linkages between formal finance (including insurance and microcredit) and informal networks. She has been a recipient of research grants from the International Growth Centre, the Tata Centre for Development, and others. Her work has been featured in outlets including the Economist and the NBER Digest and been published in journals including the American Economic Review and the American Economic Journal – Applied Economics.

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